Labor & Employment Law

Commission Class Action As Big A Threat As Misclassification Class Action

By Mark E. Tabakman, Esq.

I have often written of the dangers from class actions based on misclassification theories, e.g. administrative exemption. There are working time actions, alleging illegal policies of making employees work off-the-clock as well. In a case entitled Clara Seamands et al. v. Sears Holdings Corp. et. al employees of Sears have filed a class action in federal court in Kansas alleging improper payment of commissions and an outright failure to pay commissions. The employees claim that Sears denied them proper pay and never told them of planned/proposed reductions in their commission arrangements.

In instances in which the workers alleged that their sales records did not match up with their commission compensation, the Company failed to investigate and then did not resolve the situations. Rather, the Company allowed the issues to fester. The plaintiffs allege this was willful, not done through mere negligence.

The lawyer for the putative class stated that 'Sears has a systemic problem in the way it processes sales and pays commission.' Clearly these are moneys that should have been paid to employees, and instead Sears retained them.'

There are probably 1,000 employees that could be encompassed by the class. The lawyer believed the number could rise a lot higher. The complaint alleges violations of the employees' contracts and many state laws. As damages, the plaintiffs seek back commissions and (of course) attorneys' fees.

This case teaches that commission policies may and should be set by the employer, but they should be in writing and be disseminated to all affected employees. The employees should sign off on the commission policies and any substantive revisions or changes to them. Naturally, the employer must adhere to its own commission policy and pay commissions when they vest. When commissions vest can be open to interpretation, but once commission 'vests,' it becomes earned wages and then can form the basis of a Department of Labor complaint, or, as herein, a (potentially) nationwide class action.

Full post as published by Wage & Hour - Development & Highlights on September 11, 2009 (boomark / email).